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What are the rules and advantages of filing for Chapter 13?

Financial issues can affect anyone whether they're from Massachusetts or elsewhere around the nation. If these problems become too overwhelming, many are reluctant to consider various forms of bankruptcy due to the misplaced belief that they're shirking their commitment to pay their creditors. However, there are many advantages to getting the fresh financial start that Chapter 13 bankruptcy can provide and it's important to understand them before dismissing the idea out of hand.

Chapter 13 is also known as a plan for people who are wage earners. Those who have a consistent income can formulate a plan to repay some or all of the debts they've accumulated. A repayment plan will be crafted so the creditors will be repaid within three to five years.

Depending on the circumstances, this can be extended. If the income is less than the median of the state, the plan will be for three years. It can be made longer if there is cause to do so. If the income is higher than the median, then the plan will be for five years. In any case, no plan can be longer than five years.

For many, Chapter 13 bankruptcy is preferable to other options. Most importantly, the person filing will have the chance to save his or her home from being foreclosed upon. The foreclosure proceeding can be stopped entirely and end any delinquent payments over time. The mortgage payments must be made while the Chapter 13 is in progress.

Other debts can be rescheduled as long as they're secured. They can be extended over the life of the Chapter 13 process. This can give the debtor a chance to reduce the payments. Third parties who are liable along with the debtor for what are known as "consumer debts" are provided with an extra layer of protection from the debtor's inability to pay bills.

There is also a benefit with Chapter 13 in that it is similar to a consolidation plan where the debtor will make the payments to a trustee who will, in turn, pay the creditors. The creditors will no longer bother the debtor after the filing. Chapter 13 bankruptcy can be a confusing process and understanding its benefits in comparison to other options can be confusing. Discussing the matter and seeking guidance is an important step to take before filing for Chapter 13.

Source:, "Chapter 13: Individual Debt Adjustment," accessed on Dec. 22, 2014

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